Question

s) If the economy is in a recession, 8) A) The economy suffers from structural unemployment, which can be alleviated by debt refinancing. B) Larger deficits will decrease the national debt. C) Deficit spending will not increase the size of the debt because interest rates will be falling. D) It is operating inside the production posibilities curve, and the opportunity cost of deficit spending is zero. 9 9) An increase in unemployment, ceteris paribus, A) Reduces a budget deficit. B) Leads to decreased government expenditures. C) Reduces a budget surplus. D) Leads to increased govemment revenues. 10) 10) Spending for unemployment compensation and welfare benefits increase automatically A) When the economy goes into recession. B) When voters make the decision to increase these items C) When the economy expands. D) Only when the fiscal year begins. 11) Automatic stabilizers tend to stabilize the level of economic activity because they A) Are changed quickly by Congress. B) Control the rate of change in prices. C) Increase spending during recessions and reduce spending during inflationary periods. D) Increase the size of the multiplier 12) 12) According to Keynes, an unbalanced budget is appropriate in all of the following situations except when A) Leakages and injections are out of balance. B) The economy is at full employment. Q) Macro equilibrium is above full employment. D) The economy is below full employment. 13) In order to reduce the U.S. debt, 13) A) The government must use deficit spending. B) There will be a transfer of revenue from bondholders to taxpayers. C) Foreign governments must lend more money to the U.S. government. D) The govenment should spend less than it collects in tax revenues f) An obligation to make future payment is 14) A) An asset C) Debt refinancing. B) A liability D) Debt service
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Answer 1

Answer:

If the economy is in a recession

It is operating inside the production possibilities curve, and the opportunity cost of deficit spending is zero

During recession economic activities are low due to high unemployment, low investments etc.

An increase in unemployment, ceteris paribus:

C) Reduces a budget surplus

Because government increases its spending to compensate the increasing unemployment and increase development projects to generate employment opportunities

Spending for unemployment compensation and welfare benefits increase automatically

When the economy goes into recession

Because to bring economy out of recession government increases its spending

Automatic stabilizers tend to stabilize the level of economic activity because they

Increase spending during recessions and reduce spending during inflationary periods.

According to Keynes, an unbalanced budget is appropriate in all of the following situations except when

The economy is at full employment.

In order to reduce the U.S. debt

The government should spend less than it collects in tax revenues.

If spending will be less than revenues than government would not tale debt

An obligation to make future payment is

A liability.